James Pethokoukis

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The answer, I think, is that whatever pivot is made will be irrelevant. The fact is President Obama doesn’t have the luxury of proposing an agenda. Agendas (or at least, agendas as we have come to think of them) are for people who have money. The United States is broke. And the debt gets worse by the day.

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The fourth-quarter GDP surge was produced by a sharp turn in the inventory cycle. Firms still cut inventories in the fourth quarter, but much less severely than in the third. That led to increased production, which boosted GDP. Final sales growth, a better guide to the underlying path of the economy, was much more sedate, at 2.2%, but that was still an improvement on the third quarter’s 1.5% pace.

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The recovery from the Great Recession firmed in the fourth quarter as real GDP increased at its fastest rate since the third quarter of 2003. However, also as expected, a sharp slowing in inventory liquidation accounted for 3.4 percentage points (or 60%) of the 5.7% increase in real GDP. We are particularly impressed by the 13.3% increase in nonresidential investment (upside risk in this area was flagged by yesterday’s durable goods report).